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Jakarta Post

Editorial: Big bang in infrastructure

The launch last week of several big infrastructure projects worth more than Rp 125 trillion (US$9

The Jakarta Post
Mon, May 4, 2015

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Editorial: Big bang in infrastructure

T

he launch last week of several big infrastructure projects worth more than Rp 125 trillion (US$9.6 billion) in Central and East Java and the southern part of Sumatra is truly a piece of good news amid a wave of gloomy stories over the past year about the delay or even mothballing of many public works programs.

 The smooth preparations for the toll road, seaport and public housing projects seem to have been facilitated by the 2012 Law on land acquisition for public interests, which significantly expedites the bureaucratic procedures and strengthens the legal certainty for the acquisition of land for basic infrastructure. The combination of state budget financing and investments by state-owned construction, highway development and public housing companies further contributed to ensuring the smooth start of the project construction.

Smooth implementation of these projects will go a long way toward strengthening confidence in Indonesia'€™s infrastructure programs, which the government badly needs to attract private investment to its $80 billion infrastructure development program for the next five years.

The projects launched last week consist of a 150-kilometer highway that will form the southernmost section of the 2,800-km trans-Sumatra highway that will cost Rp 360 trillion, the improvement of the Bakauheni seaport in Lampung, the southernmost province on Sumatra Island, the Merak seaport on the westernmost part of Java Island, a toll road linking Surakarta in Central Java and Kertosono in East Java and a public housing program that will build 1 million houses.

The 2015 state budget doubles appropriations for infrastructure development to Rp 290 trillion to repair the country'€™s acute shortage of power, frail power grids, congested roads, seaports and airports, public housing and drinking water supply.

But most analysts had initially been pessimistic that the infrastructure investment would materialize smoothly, in view of the delay in the House of Representatives of the approval of the 2015 state budget revision and the seemingly perpetual problems in land acquisition and budget implementation.

But the full-fledged enforcement of the 2012 land acquisition law since early this year and the finance minister'€™s strong commitment to speeding budget disbursement seemed to have contributed greatly to expediting preparations for the projects.

Finance Minister Bambang Brodjonegoro rightly observed that private investors would closely monitor the pace of the project implementation, notably the aspect of land acquisition, to ascertain whether the government is really serious about its commitment to accelerate infrastructure development.

Investor confidence is crucial for the success of the massive infrastructure development program because the government would be able to put up only about 20 percent of the total investment needed. Smooth implementation of the projects, besides building investor confidence, will provide pump priming for the economy in the second half to offset the fall in private consumption in the first half, whereby growth is estimated to slow down to less than 5 percent.

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